Sprint Nextel Reaches a Deal to Buy Rest of Clearwire

7:07 p.m. | Updated

Sprint Nextel agreed Monday to buy all of the wireless network operator Clearwire, an important step for the cellphone service provider as it continues its big turnaround campaign.

Under the terms of the bid, Sprint will pay $2.97 a share for the nearly 50 percent stake in Clearwire that it did not already own for a total of about $2.2 billion.

The two companies must still convince restive Clearwire shareholders that they should accept a bid only modestly raised from last week and that some have called too low.

The price is a bump up from the $2.90 a share t hat it offered last Thursday, and represents a premium of 128 percent over Clearwire's stock price in early October, before speculation emerged that Sprint would seek to buy the wireless network operator. Sprint's first proposal to Clearwire, made around Nov. 21, was worth about $2.60 a share.

Clearwire's board approved the offer based on the recommendation of a special committee of directors not appointed by Sprint. Clearwire also has commitments for the deal from Comcast, Intel and Bright House Networks, which collectively own 13 percent of the voting shares.

Shares of Clearwire closed on Monday at $2.91, having fallen more than 13 percent as investors gave up on the prospects of a significantly higher offer.

Sprint is able to make the offer as a result of a cash injection from SoftBank of Japan, which agreed in October to a $20.1 billion transaction to gain majority control of the American telecommunications company. Sprint still lags far behind the market leaders, Verizon Wireless and AT&T.

The Clearwire deal would allow Sprint to expand its Long-Term Evolution network, which is based upon the same data standard used by the newest generation of smartphones. Clearwire owns spectrum that is similar to what SoftBank uses in Japan, potentially giving the newly strengthened Sprint more clout in o rdering the latest devices.

Sprint initially invested in Clearwire in 2008 as part of an unusual consortium that also included Google, Intel and Time Warner Cable, with the aim of creating a next-generation data network. The telecom had long been the biggest investor, with significant leverage over Clearwire, but did not have full control.

“It feels good,” Daniel R. Hesse, Sprint's chief executive, said in a telephone interview. “It's been a four-year journey for me, and a long journey for Clearwire's management and its board.”

Some of Clearwire's minority shareholders have said that the company should hold out for a higher price, with one analyst calling for at least $5 a share.

One of these investors, Crest Financial, said that it would try to block Sprint's deal with SoftBank if the earlier offer of $2.90 a share had gone through.

Erik E. Prusch, Clearwire's chief executive, said his company had explored a wide range of alternatives to a sale. But those options - including a sale of excess spectrum, a deal with another strategic partner or raising additional capital - would have fetched far less money.

And he noted that Clearwire had retained the Blackstone Group as an adviser on reorganization options, which people briefed on the matter have said included a potential bankruptcy filing. The company said that as of Sept. 30, it had enough cash to last for about a year, though it had slowed important network improvements.

As part of the d eal announced Monday, Sprint will provide the company with up to $800 million in interim financing.

“At this point, we believe that a restructuring is quite possible, should our transaction with Sprint not close,” Mr. Prusch said on a conference call with analysts.

In an interview, he noted that Google had sold its holdings in Clearwire this year at $2.26 a share. Time Warner Cable sold its shares for $1.37 apiece.

Citigroup and the law firms of Skadden, Arps, Slate, Meagher & Flom and King & Spalding advised Sprint. The Raine Group acted as financial adviser to SoftBank and Morrison Foerster acted as counsel to SoftBank.

Evercore Partners and the law firm Kirkland & Ellis advised Clearwire. Centerview Partners acted as financial adviser and Simpson Thacher & Bartlett and Richards, Layton & Finger acted as counsel to Clearwire's special committee. Blackstone Advisory Partners advised Clearwire on restructuring matters. Credit Suisse acted as financial adviser and Gibson Dunn & Crutcher acted as counsel to Intel.

First Quantum Offers $5.2 Billion for Inmet Mining

9:30 a.m. | Updated

LONDON â€" The mining company First Quantum Minerals has begun an improved takeover offer of 5.1 billion Canadian dollars, or $5.2 billion, for a rival, Inmet Mining, in its latest effort to buy the copper producer.

First Quantum, which operates mines from Australia to Zambia, said late on Sunday that it had offered Inmet Mining's shareholders a cash-and-stock deal valued at a $72.87 for each share in the Canadian miner.

The renewed bid for Inmet Mining represents a slight increase from a previously rejected $70.85-a-share takeover approach for the copper producer, and a 36 percent premium on the mining company's closing share price before it rejected First Quantun's initial advances.

Inmet Mining's board had rebuffed an earlier offer in late November valued at $63.26 a share.

The proposed deal follows the announcement of the $32 billion takeover by the commodities trader Glencore for the mining giant Xstrata. Despite concerns that a downturn in Asian economies could hurt short-term demand, companies are seeking to gain access to metals and minerals in expectation that fast-growing economies will soon rebound.

First Quantum, which is based in Vancouver, British Columbia, said the proposed deal would create one of the world's leading copper producers that could produce around 1.3 million metric tons of the metal each year by 2018.

The mining company said it had taken its takeover approach directly to Inmet Mining's shareholders, and called on the company's board to reconsider its multibillion-dollar offer. First Quantum added that it had held discussions with a number of Inmet Mining's top investors about the proposed deal. The company did not say which investors it had contacted.

“We believe strongly in the prospects of a combination for our two companies,” First Quantum's chief executive, Philip Pascall, said in a statement. “Our clear preference remains to engage with Inmet, as we believe strongly in the compelling strategic and financial merit of the transaction.”

Inmet Mining said on Monday that it had not yet received First Quantam's offer, and advised shareholders not to take any action until the company had evaluated the new approach.

The board “will recommend a course of action that is in the best interests of Inmet and its stakeholders,” the company said in a brief statement.

Inmet Mining, which is based in Toronto, owns the Cobre Panama copper project, one of the world's largest remaining untapped deposits of the metal. The mining company said it expected to spend more than $6 billion to develop the site, and recently announced a 27 percent increase in the project's copper deposits.

First Quantum said that it would finance the takeover through its cash reserves and $2.5 billion of bank credit.

Jefferies International, Goldman Sachs and RBC Capital Markets are advising First Quantum on the deal.

Sun Life to Sell U.S. Annuity Business for $1.35 Billion

Sun Life Financial, Canada's third-largest life insurance company, announced on Monday a deal to sell its annuity and some life insurance businesses in the United States for $1.35 billion.

The buyer is a company whose owners include Guggenheim Partners, which might be best known for heading up the group that acquired the Los Angeles Dodgers earlier this year. Guggenheim Partners has expanded beyond money management into insurance and investment banking, among other businesses. With former Bear Stearns chief executive, Alan Schwartz, as its executive chairman, Guggenheim, which is based in New York and Chicago, has more than $160 billion in assets under management.

The sale of the Sun Life busin esses had been expected after the company announced late last year that it would stop selling new annuities. The acquired businesses will be renamed the Delaware Life Insurance Company.

The chief executive of Sun Life, Dean A. Connor, said in a statement: “This transaction represents a transformational change for Sun Life. It significantly advances our strategy of reducing Sun Life's risk profile and earnings volatility, focuses our U.S. operations on our areas of greatest strength and opportunity, and crystallizes future earnings and capital releases that will further support our growth and shareholder value creation.”

The transaction is expected to close by the end of the second quarter next year.

Morgan Stanley and the law firm of Debevoise & Plimpton advised Sun Life Financial.

Before Facebook Deal, Instagram\'s Talks With Twitter

BEFORE FACEBOOK DEAL, INSTAGRAM'S TALKS WITH TWITTER  |  Facebook's deal to buy Instagram for $1 billion stunned Wall Street and Silicon Valley when it was announced in April. But executives at Twitter had an additional reason to be surprised. Instagram's founders “held several meetings as late as March with top Twitter executives,” The New York Times's Nick Bilton reports. “The sides had verbally agreed weeks earlier on a price for Instagram of $525 million in cash and Twitter shares,” Mr. Bilton reports, citing people on both sides of the talks, who requested anonymity because the talks were private and because they were concerned about legal repercussions.

That would appear to contradict statements that Instagram's ch ief executive, Kevin Systrom, made under oath, according to Mr. Bilton. Mr. Systrom testified in August at a hearing of the California Corporations Department that his company “never received any offers” at the time of the negotiations with Facebook. Instagram, he said, “talked to other parties, but never received any formal offers from anybody else.”

But when the deal was announced, Twitter executives were “shocked that they had not been given an opportunity to present a counteroffer,” Mr. Bilton reports. The people familiar with the negotiations “said Twitter was prepared to make higher offers.” The Facebook deal closed at $735 million in early September, after Facebook's stock tumbled. Mr. Bilton writes: “It is possible investors would have been better off selling in an open auction, to Twitter or even to Google or Microsoft.”

It's not yet clear how Instagram might make money, but some of its users have built businesses that piggyback on the photo-sharing service, The New York Times reports.

A.I.G. PREPARES TO EXIT ASIAN INSURER  |  After becoming a fully private enterprise for the first time since 2008, the American International Group is now preparing to end its longtime association with the Asian insurer AIA Group. On Monday, A.I.G. said it was beginning a process to sell its 13.7 percent stake in AIA, valued at about $6.7 billion. Shares in AIA were suspended from trading in Hong Kong pending an announcement on the outcome of the sale process. Neil Gough of DealBook writes: “In the end, A.I.G. may sell only part of its stake. A.I.G said it would sell the shares t o institutional investors and will use the proceeds from the deal for general corporate purposes.” A.I.G. has been gradually reducing its stake in AIA since the Asian insurer was spun out in 2010.

ARGENTINE SHIP TO SAIL HOME  |  While Argentina remains locked in a fight with hedge funds over defaulted bonds, the government is at least getting its naval ship back. A United Nations court on Saturday ordered the immediate release of the Libertad, the Argentine ship that became a pawn in the legal battle when it was detained in Ghana in early October, The Financial Times reports. Elliott Management, one of the hedge funds trying to force Argentina to pay up on old bonds, had obtained a court order to detain the ship, leading to “one of the most spectacular and embarrassing” ep isodes in Argentina's years-long legal struggle.

ON THE AGENDA  |  Mario Draghi, president of the European Central Bank, speaks at the quarterly hearing of the European Parliament's Economic and Monetary Affairs Committee at 9:30 a.m. David Tepper of Appaloosa Management is on CNBC at 8 a.m. Mohamed El-Erian, chief executive of Pimco, is on CNBC at 3:10 p.m.

A DOCTOR'S DOUBLE LIFE  |  Sidney Gilman, the Alzheimer's researcher at the center of the insider trading case against a former employee of SAC Capital Advisors, “was living a parallel life, one in which he regularly advised a wide network of Wall Street traders through a professional matchmaking system,” The New York Times writes. “The riddle for Dr. Gilman's longtime friends and colleagues is why a nationally respected neurologist was pulled into the high-rolling life of a consultant to financiers and how he, by his own admission, crossed the line into criminal behavior.” This conversion was not readily apparent in Dr. Gilman's lifestyle in Michigan, but colleagues now say his story provides a cautionary tale for those in academic medicine.

With the latest insider trading cases, the government continues to circle near Steven A. Cohen, the founder of SAC Capital. E-mails that were made public in the trial against two former hedge fund managers suggest that Mr. Cohen may have been consulted on a questionable trade in Dell stock, Bloomberg News reports. “Guys, I w as talking to Steve about Dell earlier today and he asked me to get the two of you to compare notes before the print, as we are on opposite sides of this one,” Michael S. Steinberg, a longtime SAC portfolio manager, wrote to two others at the firm.

Mergers & Acquisitions '

Sprint Reaches Deal to Buy Out Clearwire  |  Sprint increases its offer for Clearwire and its valuable wireless spectrum to $2.97 a share from $2.90 and wins the support of its board.
DealBook '

First Quantum Offers $5.2 Billion for Inmet Mining  |  The mining company has begun an improved $5.2 billion takeover offer for rival Inmet Mining in its latest attempt to buy the copper producer.
DealBook '

Cisco Said to Seek Buyer for Linksys  |  Cisco Systems has hired Barclays to find a buyer for Linksys, which is likely to sell for less than the $500 million Cisco paid for the company in 2003, Bloomberg News reports, citing unidentified people with knowledge of the situation.
BLOOMBERG NEWS

Buffett Hints at Interest in Allentown, Pa., Newspaper  |  When asked if he mi ght buy The Allentown Morning Call, Warren E. Buffett said, “Allentown is our kind of place.”
ALLENTOWN MORNING CALL

Best Buy Gives Founder More Time to Make a Bid  |  The beleaguered electronics retailer says it will give its founder, Richard Schulze, until Feb. 28 to make a takeover bid for the company, so that he may look at holiday sales numbers.
DealBook '

INVESTMENT BANKING '

A Warning for Investors in Long-Term Bonds  |  The New York Times columnist Floyd Norris writes: “Much of the recent issuance in bonds has been because of refinancing, in which companies repay existing bonds with money borrowed on better terms. For holders, it can seem the worst of both worlds: if rates rise, they have old bonds that have lost value. If rates fall, their old bonds are redeemed by the company, depriving them of the yield they expected.”
NEW YORK TIMES

Morgan Stanley Names New Regional Chiefs for Mergers Unit  |  Morgan Stanley named new heads of mergers and acquisitions for the Americas and for Europe on Friday after a management reshuffling brought on by t he impending departure of the senior deal maker Paul Taubman.
DealBook '

Morgan Stanley Builds Up Its Private Bank  | 
FINANCIAL TIMES

Santander Considers Absorbing a Subsidiary  |  Banco Santander said it would study “fully absorbing its 90-percent owned subsidiary Banesto,” Reuters reports.
REUTER S

Lazard Hires Ex-KPMG Executive in Australia  | 
WALL STREET JOURNAL

PRIVATE EQUITY '

K.K.R. Said to Raise $6 Billion Fund for Asia  |  K.K.R. has amassed “the largest private equity pool ever assembled” for Asia, Reuters reports, citing unidentified people.
REUTERS

Rise of Leverage Recalls Precrisis Deals  |  The Wall Street Journal reports: “Private equity firms are using almost as much debt to fund acquisitions as they did before the financial crisis, as return-hungry investors rush to buy bonds and loans backing those takeovers.”
WALL STREET JOURNAL

A Wrinkle in Carlyle's Deal for TCW  |  The Carlyle Group's “planned $780 million takeover of TCW Group Inc could prove less lucrative than envisioned due to the investment manager's financial ties to buyout firm EIG Global Energy Partners LLC, a TCW document to its lenders shows,” Reuters reports.
REUTERS

HEDGE FUNDS '

Hedge Funds Face the Prospect of Lower Fees  |  Financial News writes: “For hedge fund managers, the year marked an acceptance that they would finally need to give up the lucrative fee rates.”
FINANCIAL NEWS

A Year When Many Hedge Funds Went Under  | 
FINANCIAL NEWS

I.P.O./OFFERINGS '

SeaWorld Said to Prepare for I.P.O. Filing  |  SeaWorld Parks and Entertainment, which is controlled by the Blackstone Group, is close to filing for an initial public offering that may aim to raise $500 million to $600 million, Reuters reports, citing three unidentified people familiar with the situation.
REUTERS

Hong Kong's Slowdown in I.P.O.'s  |  In the global rankings for initial public offerings, Hong Kong has fallen to fourth place this year after three years on top, The Financial Times reports.
FINANCIAL TIMES

VENTURE CAPITAL '

Apps That Recall Details of Your Past  |  Apps like Timehop and Rewind.me, which offer reminders of past activity on social media, “are byproducts of a time of information overload,” The New York Times's Jenna Wortham writes.
NEW YORK TIMES

LEGAL/REGULATORY '

S.E.C. Says Asset Firm Manipulated Trades to Enrich Some Clients  |  Federal regulators said that Aletheia Research and Management steered profits to some clients, and to the firm's co-founder, Peter J. Eichler Jr., at the expense of others.
DealBook '

British Authorities Charge Hedge Fund Founder  |  The founder of Weavering Capital, one of Britain's oldest hedge funds, has been charged with fraud, fraudulent trading and false accounting.
DealBook '

Gupta Challenges Goldman Over Legal Fees  |  Rajat K. Gupta, the former Goldman Sachs director convicted of leaking boardroom secrets, “said Friday that the investment bank hasn't justified its request for nearly $7 million in legal fees and other expenses it claims were spent in connection with his insider-trading case,” The Wall Street Journal reports.
WALL STREET JOURNAL

Google Antitrust Case Said to Be Near Resolution  |  The Bits blog reports: “In the talks between the Federal Trade Commission and Google to negotiate the terms for ending the agency's antitrust investigation, things seem to be going Google's w ay, two people who have been briefed on the discussions said Sunday.”
NEW YORK TIMES BITS

In Google Antitrust Case, Onetime Allies on Opposite Sides  |  Two lawyers on opposite sides of Google's antitrust struggle, Gary L. Reback and Susan A. Creighton, were once partners in the antitrust case against Microsoft 14 years ago, The New York Times writes.
NEW YORK TIMES

Joh. A. Benckiser to Buy Caribou Coffee for $340 Million

Joh. A. Benckiser seems to be quite the coffee aficionado.

Benckiser agreed on Monday to buy the Caribou Coffee Company for about $340 million, in its second acquisition of a coffee shop operator this year. Only five months ago, the German conglomerate announced that it would acquire Peet's Coffee & Tea, one of America's oldest specialty coffee sellers, for about $974 million.

Under the terms of Monday's deal, Benckiser will pay $16 a share, which represents a roughly 30 percent premium to Caribou's closing price on Friday.

Over the last year, Benckiser - a holding company for the wealthy Reimann family of Germany - has shown a growi ng hunger for well-known brands. It already owns the likes of Coty, the cosmetics maker; Jimmy Choo, the crafter of sleek women's shoes; and Reckitt Benckiser, the household products giant.

This spring, Benckiser backed Coty in its ill-fated effort to buy Avon Products for $10.7 billion.

“Caribou has a fantastic brand and unique culture, and fits perfectly with JAB's investment philosophy of investing in premium and unique brands in attractive growth categories like coffee,” Bart Becht, Benckiser's chairman, said in a statement. “JAB is committed to investing in Caribou as a standalone business out of Minneapolis to ensure the company continues its current highly successful track record.”

Caribou will continue to be run by its existing management team and will remain based in Minneapolis.

As it did on the Peet's deal, BDT Capital Partners, the merchant bank run by a former Goldman Sachs rain maker, Byron D. Trott, advised Benckiser and will make a minority investment as well. The German company was also advised by Morgan Stanley and the law firm Skadden, Arps, Slate, Meagher & Flom.

Caribou was advised by Moelis & Company and the law firm Briggs and Morgan.

Voluntary Disclosure on Corporate Political Spending Is Not Enough

One of the challenges that the Securities and Exchange Commission will face next year is how to address investor concerns about corporate political spending.

Shareholders have grown increasingly interested in receiving information about the money corporations spend on politics. In response to their demands, about 60 percent of the companies in the Standard & Poor's 100-stock index have adopted voluntary disclosure policies.

Opponents of mandatory disclosure rules are likely to use this development to buttress their position. They will argue that information about political spending should be left to private ordering, allowing c ompanies to choose the level and type of disclosure that best suits their needs.

This argument is unpersuasive, however. The S.E.C. has declined to rely on voluntary disclosure for many types of corporate financial information considered to be important to investors. For several of the same reasons, voluntary disclosure on corporate political spending is similarly inadequate.

To begin, the quality of information provided under voluntary disclosure policies is generally low. A study based on a review of the voluntary disclosures of more than 350 companies listed on the S.&P.-500 stock index, conducted by Vishal P. Baloria, Kenneth J. Klassen and Christine I. Wiedman of the University of Waterloo in Ontario, concluded that “disclosure of both observable and unobservable political spending is very poor.” Mandatory rules would address gaps and loopholes in voluntary disclosure practices.

In addition, the type of information companies voluntarily provide varies widely. The disclosures also do not follow uniform practices, makes meaningful comparisons among companies difficult. Mandatory rules that require companies to present the information in a standard manner would facilitate comparisons.

Furthermore, after a decade of shareholder pressure to encourage public companies to disclose political spending voluntarily, the vast majority of companies not in the S.& P. 100 fail to provide any information at all. It would take considerable resources - and many years - for shareholders to engage effectively with the thousands of public companies that do not have voluntary disclosure arrangements.

The S.E.C. has avoided in the past placing such burdens on public investors. For example, in the 1990s, the S.E.C. adopted mandatory disclosure rules on executive pay after shareholder proposals seeking information about executive pay obtained significant sup port at a number of prominent companies. The reason, of course, is that it is unreasonable to expect investors to pursue action on a company-by-company basis at thousands of public corporations.

Furthermore, even if investors were able to engage all public companies, there is little reason to expect that they would all be responsive. And those companies most resistant to voluntary disclosure might be disproportionately likely to engage in political spending that shareholders would disfavor. Mandatory rules would be in any event necessary to deal with such cases.

Of course, mandatory disclosure rules on corporate political spending would simply set a minimum standard for the information that must be provided. Companies could still tailor disclosures to their particular circumstances, and they would be free to provide additional information. Indeed, many public companies offer more information on executive pay than the S.E.C. requires.

The fact that some larg e public companies have begun to voluntarily disclose information on political spending is a positive development. It does not remove, however, the need for S.E.C. action. Mandatory rules are needed to ensure that all public companies provide investors with adequate information about whether and how their money is spent on politics.

Lucian A. Bebchuk, a Harvard Law School professor, and Robert Jackson Jr., a Columbia Law School professor, are co-chairmen of a committee that has submitted a rule-making petition on corporate political spending to the S.E.C. They are also co-authors of a study titled “Shining Light on Corporate Political Spending.”

In a Rare Move, a Cravath Partner Leaves for Another Firm

It is almost unheard of for a partner to leave Cravath, Swaine & Moore, one of the country's most profitable and prestigious law firms. It is even rarer still for a partner to leave Cravath for another firm.

Yet corporate lawyer Sarkis Jebejian did just that. The law firm Kirkland & Ellis announced on Monday that Mr. Jebejian had left Cravath to join its New York office.

“Sarkis is one of the country's leading M&A practitioners with significant experience representing clients on a wide range of transactional, corporate governance and M&A work,” Jeffrey C. Hammes, the chairman of Kirkland, said in a statement.

A member of Cravath's vaunted mergers and acquisitions team, Mr. Jebejian has been involved in a number of noteworthy transactions, including working on the complex deal that merged Kohlberg Kravis Roberts's European affiliate into the KKR parent company and advising the independent directors of Merrill Lynch in its acquisition by Bank of Americ a.

He joins Kirkland, a firm that has built a preeminent M.&.A. practice in part due to several prominent lateral hires. In 2009, for example, it brought on David Fox and Daniel Wolf from Skadden, Arps, Slate, Meagher & Flom.

Mr. Fox made news twice on Monday. He was part of the team of Kirkland lawyer that advised Clearwire Corporation on its multibillion-dollar transaction with Sprint, and represented the financial adviser to Caribou Coffee in the company's sale to the German conglomerate Joh. A. Benckiser Group.

A Cravath “lifer,” Mr. Jebeian, 43, joined the firm in 1994 straight out of Columbia Law School, made partner in 2002, and has never worked anywhere else.

Such a career track is typical for a Cravath lawyer, or at least the ones who succeed there. The firm ranks as the fifth most profitable in the country, with profits per partner of $3.1 million, according to the the American Lawyer magazine. In September, DealBook wrote a story on Cravath's “lock-step” compensation system, which pays partners in a narrow band according to seniority.

Star partners occasionally leave Cravath - “planets occasionally spin out,” was how Evan Chesler, the firm's managing partner, put it earlier this year - but typically go to an investment bank or move in house. Robert Kindler, the vice chairman at Morgan Stanley, and James Woolery, a senior banker at JPMorgan Chase, were both Cravath partners. Julie Spellman Sweet left to become general counsel of Accenture, and Ronald Cami departed for the senior legal post at TPG.

Leaving for another firm is even more unusual. The last partner who made a lateral move from Cravath was W. Clayton Johnson, who in 2005 left for Cleary Gottlieb Steen & Hamilton. But Mr. Johnson left because he married a Chinese citizen and wanted to live in China, according to a person with know ledge his thinking. Other than a very small London office, Cravath has all of its partners in New York.

“It was a difficult decision to leave Cravath, and I will always cherish my career there, but I am excited to join Kirkland & Ellis and its talented team of M.&.A. lawyers, many of whom I have known for some time,” Mr. Jebejian said in a statement.

A spokeswoman for Cravath, Deborah Farone, said, “We wish Sarkis well in the next stage of his career.”

Elliott Bids $2.3 Billion for Compuware

Elliott Management has pulled out a trusted strategy from its technology investment playbook.

On Monday, the hedge fund offered to buy Compuware, a business software maker, for about $2.3 billion, repeating a tactic that prompted the sale of Novell in late 2010.

Under the terms of its bid, Elliott would pay $11 a share, which is 25 percent higher from when the hedge fund first disclosed its stake in Compuware last month. The $20 billion hedge fund owns about 8 percent of the company's shares.

Compuware said in a statement that it was reviewing the takeover proposal.

Jesse Cohn, one of Elliott's portfolio managers, has agitated for change at a number of technology companies - and done well. The firm bid about $2 billion for Novell, which later put itself up for auction and eventually sold i tself to the Attachmate Corporation for about $2.2 billion.

The hedge fund also pressed BMC Software to explore a sale, which the software maker acceded to in October. Elliott also pushed for a number of changes at Iron Mountain last year, including the replacement of the information management company's chief executive.

In a letter to Compuware's board on Monday, Mr. Cohn wrote that the bid was motivated by what he sees as the company's underperformance. Compuware, he wrote, trailed the Nasdaq stock index by an average of 6 percent over the last year; it lagged the Standard & Poor's 500-stock index by 34 percent over the last two years.

“Compuware is a long-established company that we have followed closely for several years,” he wrote. “We believe in the quality of Compuware's assets â€" however, its execution, profitability and growth have meaningfully underperformed.”

People close to Elliott said that several private equity firms have expre ssed interest in buying the company for some time.

Other activist investors, including Carl C. Icahn, have bid for a company in the hopes of flushing out others willing to pay more.

But the people close to Elliott said that the hedge fund has the resources to pay up for Compuware. That said, Mr. Cohn wrote in his letter that his firm's bid is subject to due diligence and the availability of financing. Elliott has had conversations with potential lenders.

So far, the activist hedge fund has stirred up interest among its fellow investors: Shares in Compuware were up more than 13 percent by midday trading on Monday, to $10.80. Still, they remain below Elliott's offer, suggesting that some shareholders may be skeptical about the arrival of a higher bid.

The bid follows number of cha nges at Compuware. Almost two months, the company announced that its executive chairman and co-founder, Peter Karmanos, would retire in March. And last Friday, Compuware said that its Covisint subsidiary, which makes business communication software, was preparing to go public.

G.E. Said to Be Close to Buying Avio for $4 Billion

General Electric is expected to strike a deal to buy the Italian aerospace company Avio for $4 billion or more, in a bid to bolster its commercial jet engine business.

The deal between G.E. and Avio's owner, the British private equity firm Cinven, is expected to come together this week, according to a person with knowledge of the discussions who spoke on condition of anonymity because the talks were private. The person cautioned that the transaction might still fall apart.

Cinven bought a majority stake in Avio in 2006 from the Carlyle Group and Finmeccanica, in a deal valued at more than $3.3 billion. At the time, the private equity firm trumpeted Avio's technology and its partnership with top industry players like G.E. and Pratt & Whitney. The company had more than 4,800 employees with annual revenue of $1.8 billion.

Cinven wanted to take Avio public this year. But the private equit y firm shelved the plans amid the weakness in the European market for initial public offerings, according to the person.

Several players had taken a look at Avio. A group of investors including CVC Capital Partners had been in talks with Avio, according to Reuters.

Avio is a natural fit in G.E.'s portfolio. The two companies have had a relationship since the 1960s. The Italian jet parts manufacturer currently works with G.E. on a number of major projects, including an engine for the Boeing 787 Dreamliner and one for the Boeing 777.

The negotiations have been on and off since G.E. first expressed interest in a deal last year. The American company is now finalizing a bid to buy Avio for more than 3 billion euros, or $4 billion. News of the deal was previously reported by The Wall Street Journal.

A representative for G.E. could not immediately be reached for comment. A spokeswoman for Cinven declined to comment.

Michael J. de la Merced contributed reporting.

Changing China\'s Growth Model

China's Central Economic Work Conference concluded Sunday. The annual meeting sets economic goals for the year ahead and usually includes a grab bag of policy prescriptions.

In keeping with the 18th Party Congress report's emphasis on shifting to a more sustainable growth model, the official statement from the conference vowed that China would focus on the quality and efficiency of economic growth in 2013, deepen economic reforms, further urbanization and maintain strict property controls. The conference did not publicly provide an economic growth target for 2013 but most analysts believe the government is aiming for at least 7.5 percent.

Some argue that China is sending a strong signal on economic reforms but not everyone is convinced. FT Alphaville told readers:

Don't be misled by the proclamations of “reform” or “quality growth” from China's central economic work conference at the weekend. It's more of the same, at least for the time being.

The economy appears to have bottomed out, as evidenced by recent data and the fact that in November China power consumption grew at the fastest pace in nine months. But the growth is still heavily weighted toward investment over consumption and last week the China Academy of Social Sciences published a report warning that that the economic imbalance has significantly worsened over the last 10 years.

The government is aware of the problems and has promised repeatedly to change the growth model. Xi Jinping, in power for barely a month, has raised expectations for reforms, as Xinhua noted in “China Awaits More After Xi's New Moves“:

Now that the public's expectations have been raised, the challenge lies in living up to these expectations..

People are also wondering whether monopolies will be broken up or at least weakened, whether more opportunities will be given to the private sector, and whether gaps can be narrowed between different industries and state-owned and private companies.

ONE OF THE KEYS TO WEAKENING MONOPOLIES and strengthening the private sector might be the long-awaited income distribution reform plan. Premier Wen Jiabao has talked about such a plan since 2004 and over the last several months there have been repeated promises in the Chinese press that a plan would be delivered before the end of the year.

Last week, The Wall Street Journal wrote in “China Tries to Shut Rising Income Gap” that:

Now, the plan is finally set to be released this month after a push by Mr. Wen, in the 11th hour of his tenure. But after at least a half-dozen drafts, some of the most significant proposals have been watered down, or dropped completely, after opposition from state-owned firms, researchers involved in the project say. The result is a general set of principles rather than a practical road map with specifics on how to redistribute wealth, they say.

Caijing, one of China's top business magazines, on Monday reported that the plan would be delayed past the end of the year because of opposition by special interest groups.

This is potentially bad news, though the income distribution reform plan is Wen Jiabao's initiative and he is a lame duck. It is possible that Mr. Xi and Li Keqiang, Mr. Wen's successor, want to introduce their own plan sometime in 2013, though if you believe in “seeking truth from facts ” this new delay is both a worrisome sign of the power and intransigence of Chinese special interests and a risk for Xi Jinping, as raising expectations can be dangerous if you do not deliver.

China has also raised expectations in its dispute with Japan over the Diaoyu/Senkaku Islands. Last week China conducted aerial reconnaissance of the disputed Diaoyu/Senkaku Islands, a move that prompted Washington to “raise concerns” with Beijing. The New York Times reports that the overflight is part of a strategy to regain effective control of the islands that was set three months ago and overseen by Mr. Xi, before the 18th Party Congress.

The Chinese government has repeatedly stated that the islands are Chinese territory and any retreat from the more assertive position it has taken over the last several months could be very damaging to the government's credibility.

On Sunday Japan elected Shinzo Abe as Prime Minister in a landslide victory for his Liberal Democratic Party, whose “manifesto maintains Japan should step up control over the disputed islands and consider stationing officials there permanently.”

OCCUPATION OF THE ISLANDS by either side would be an explosive move. At a conference in Sanya over the weekend, former President Jimmy Carter called for Japan and China to reach a “no occupation” consensus over the Diaoyu/Senkaku Islands.

The United States, whose top two foreign holders of its debt are Japan and China, is in a difficult position. Last week Mr. Carter was in Beijing and his meetings with Mr. Li and Mr. Xi received top billing in state media. During his meeting, Mr. Xi called for more “positive energy” for the China-U.S. partnership. It appears that Mr. Xi is signaling that he wants a good relationship with the United States, in spite of the growing tensions with Japan.

Given the highly public assertiveness of the last several months however, China will not ignore moves by Mr. Abe to fulfill his campaign pledges to step up control over the disputed islands. Conflict is unlikely, but continued tensions and a growing arms race in the region appear inevitable.

Massachusetts Fines Morgan Stanley Over Facebook I.P.O.

Morgan Stanley is paying for its role in the troubled stock market debut of Facebook.

On Monday, Massachusetts's top financial authority fined the bank $5 million for violating securities laws, the first major regulatory action tied to Facebook's initial public stock offering.

William F. Galvin, the secretary of the commonwealth of Massachusetts, accused the bank of improperly influencing the stock offering process. The regulator's consent order asserts that a senior Morgan Stanley banker coached Facebook on how to share information with stock analysts who cover the social media company, a potential violation of a landmark legal settlement with Wall Street. While the banker never contacted the analysts directly, his actions, Mr. Galvin said, put ordinary investors at a disadvantage because they lacked access to the same research.

“The broader message here is we are going to use any means possible to enforce the strict code in place about giving out info rmation,” Mr. Galvin said in an interview. “We want to get the message across that if Wall Street wants to get confidence back, they can't disadvantage Main Street.”

The consent order did not name the Morgan Stanley banker, referring to him as a “senior investment banker.” But information in the regulator's order indicated that it was Michael Grimes, one of the nation's most influential technology bankers.

“Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable regulations and laws,” a Morgan Stanley spokeswoman, Mary Claire Delaney, said. Morgan Stanley, in settling the case, neither admitted nor denied guilt.

Mr. Grimes, through Ms. Delaney, declined to comment. Although the banker was referred to in the order, Mr. Grimes has not been personally accused of any wrongdoing.

The Facebook public offering was one of the most highly anticipated debuts of the last decade. In the run-up to the of fering, investor interest was robust, prompting the company to increase the size of the offering and raise the share price to $38.

But the I.P.O. quickly turned into a debacle. The first day of trading was plagued with problems. The shares quickly fell below their offering price. The stock closed on Monday at $26.75.

Since the offering, Mr. Galvin and other regulators have opened wide-ranging investigations into Facebook and the banks that handled its debut. The continuing inquiries by the Securities and Exchange Commission and the Financial Industry Regulatory Authority are examining how the banks disseminated nonpublic information to big investors - and whether it conflicted with Facebook's public disclosures.

Regulators are also looking into Nasdaq, the exchange where Facebook trades. They are questioning whether the exchange failed to properly test its trading systems, which faltered during the stock offering.

The Massachusetts regulator is focuse d on Morgan Stanley's communications with analysts.

Shortly before the Facebook offering, analysts at several banks lowered their growth estimates for the social network. The move came after Facebook issued an amended prospectus, detailing a potential slowdown in revenue.

A Facebook executive, whose name was not given in the order but who was referred to as the treasurer, also reached out to analysts. Mr. Galvin's order asserted that the executive, in private conversations with analysts, had provided additional information on the revenue. The order indicated that Mr. Grimes was personally involved in the decision to file the new prospectus and to have Facebook communicate with analysts.

“Morgan Stanley's senior investment banker did everything but make the phone calls himself,” the Massachusetts regulator said in a statement, referring to Mr. Grimes. “He not only rehearsed with Facebook's treasurer who placed the calls to the research analysts, but he also drafted the majority of the script Facebook's treasurer utilized.”

Just 12 minutes after filing the amended prospectus with regulators on May 9, the Facebook treasurer phoned Wall Street research analysts from her hotel, according to the order. She had a 15-minute conversation with Morgan Stanley analysts, and then spoke with JPMorgan Chase and other banks.

The calls provided the analysts with additional information that did not appear in the amended prospectus, the order said. The conversations, for example, included “quantitative information regarding Facebook's” second-quarter 2012 projections.

This behavior, Mr. Galvin said, crossed the line, violating the regulatory settlement on stock research that Morgan Stanley and other companies signed in 2003. The agreement limits the communication between bankers and research analysts and bans companies from influencing stock reports to try to bolster banking operations.

The Morgan Stanley case falls into a curious gray area.

Bankers spend months preparing companies to go public, a role that includes providing guidance on research analysts. In this instance, Mr. Grimes did not personally place the calls, which would have been a clear violation of securities laws.

In his testimony before the Massachusetts regulator's staff, Mr. Grimes indicated that the bank had pushed for Facebook to file publicly an amended prospectus to avoid “the appearance” that the company was sharing information with a select group of clients rather than broadly with investors. Mr. Grimes, the order noted, consulted with Morgan Stanley and Facebook lawyers. Ultimately, Facebook's chief financial officer, David A. Ebersman, e-mailed the company's board to say that the new filing would “help us to continue to deliver accurate” information without “someone claiming we are providing any selective disclosure.”

Mr. Grimes, in testimony with the regulator, further defe nded his role. While the Facebook treasurer was making the calls, he noted that “I was far down the hall so I wouldn't hear anything.”

Even so, Mr. Grimes, according to the consent order, e-mailed Mr. Ebersman to say that the Facebook treasurer “was a champ in the hotel tonight,” after the treasurer wrapped up the calls.

2 Former Hedge Fund Managers Found Guilty in Insider Trading Case

Two former hedge fund managers were found guilty on Monday of fraud and conspiracy, the latest convictions in the government's campaign to eliminate illegal conduct on Wall Street trading floors.

After two full days of deliberations, a jury convicted Anthony Chiasson, a co-founder of Level Global Investors, and Todd Newman, a former portfolio manager at Diamondback Capital Management. The two had denied charges that they participated in a conspiracy that made more than $70 million illegally trading technology stocks.

Level Global and Diamondback were founded by former employees of SAC Capital Advisors, the $14 billion hedge fund run by Steven A. Cohen that has become a focus of the government's insider trading inquiry. Mr. Cohen has not been accused of any wrongdoing, and his spokesman has said that Mr. Cohen acted appropriately.“With today's guilty verdicts, Todd Newman and Anthony Chiasson join the ranks of high-level investment fund managers who are being made to answer for their extraordinarily bad risk-reward analysis about what is right and what is wrong,” Preet Bharara, the United States attorney in Manhattan, said in a statement.

Both Mr. Chiasson and Mr. Newman sat stone-faced as the jury foreman announced the guilty verdict. After it was read, Mr. Newman slouched in his chair; Mr. Chiasson stared blankly. Judge Richard J. Sullivan, the judge presiding over the case, set sentencing for April 19. Until then, they are free on bail.

Gregory Morvillo, a lawyer for Mr. Chiasson, 39, said his client “has always been, and will continue to be, an honest, hardworking man,” and would appeal. Stephen Fishbein, a lawyer for Mr. Newman, 48, declined to comment.

Juries in Federal District Court in Manhattan have convicted all 11 insider -trading defendants who have taken their cases to trial since 2009, the year that prosecutors began bringing charges arising out its multiyear investigation into criminal activity at hedge funds.

Of the 72 people charged with insider trading crimes - a collection of traders, corporate executives, consultants and lawyers - the United States attorney's office in Manhattan has secured 71 guilty pleas or convictions. (Deep Shah, an indicted former analyst at Moody's, has been declared a fugitive.)

The trial of Mr. Chiasson and Mr. Newman grew out of one of the bigger insider trading conspiracies uncovered by prosecutors. In November 2010, the F.B.I. raided the offices of Level Global and Diamondback. About a year later, prosecutors charged Mr. Chiasson, Mr. Newman and six others with a participating in a “tight-knit circle of greed” that earned illegal profits by trading the stocks of Dell, the computer company, and Nvidia, a chip maker.

Six of the eight defendants pleaded guilty, but Mr. Chiasson and Mr. Newman fought the charges, denying that they traded while knowingly in possession of secret information.

The case against Mr. Chiasson and Mr. Newman was seen as more challenging for the government than many previous insider trading prosecutions. In earlier cases, including the trial of the former hedge fund manager Raj Rajaratnam, the government played for the jury dozens of secretly recorded incriminating conversations.

In this case, however, the government did not have either defendant on wiretap. Instead, prosecutors were forced to rely on witness testimony, along with a smattering of e-mails and instant messages that they said showed that Mr. Chiasson and Mr. Newman traded while knowingly armed with secret corporate information.

The government built its case around the testimony of two key witnesses: Spyridon Adondakis, who is known as Sam, who worked for Mr. Chiasson at Level Global, and Jesse Tortora, who was supervised by Mr. Newman at Diamondback.

Both testified that they received secret financial information from sources inside the technology companies and then passed the tips along to their bosses. At Level Global, Mr. Chiasson used the confidential data to make a big bet against Dell and - in a single trade - earn more than $50 million, according to prosecutors.

The defense attacked the credibility of Mr. Adondakis and Mr. Tortora.

The two witnesses were depicted as part of a group of young, brash Wall Street traders that partied together in the Hamptons and called themselves the “Fight Club.”

Both were also portrayed as pliant cooperators seeking to curry favor with the government in the hopes of receiving a lenient sentence. Defense lawyers called Mr. Adondakis an “easy, practiced liar” and Mr. Newman was labeled someone who “cannot and should not be trusted.”

The defense also argued that both Mr. Chiasson and Mr. Newman had no idea that the information provided to them by their “Fight Club” underlings came from secret sources inside the technology companies, believing instead that it was based on fundamental research.

A jury of 12 New Yorkers, which included a dog walker and a r etired postal worker, rejected their defenses. “There was a lot of evidence,” said one of the jurors, David Barksdale, after the verdict. “We took into account pretty much everything.”

The five-week trial garnered attention in part because of two funds' ties to SAC. Mr. Chiasson co-founded Level Global with David Ganek, a former star trader at SAC who earned more than $100 million working for Mr. Cohen.

The two left SAC and started Level Global in 2003. At its peak, Level Global managed about $4 billion in assets.

While Mr. Chiasson operated behind the scenes, Mr. Ganek cut a prominent figure in New York society. Mr. Ganek and his wife, the novelist Danielle Ganek, are noted art collectors and own an apartment at 740 Park Avenue, one of the city's most prestigious residential buildings.

During the trial, Judge Sullivan ruled that Mr. Ganek was a co-conspirator in the case. Mr. Ganek has not been charged with a crime, and his lawyer has said th ere is no evidence that he knew about any inside information.

Diamondback, where Mr. Newman worked as a portfolio manager, was started by Richard Schimel and Larry Sapanski, two former SAC employees. The fund grew to $6 billion in assets under management before becoming ensnared by the insider trading investigation.

Another former Diamondback employee, Anthony Scolaro, pleaded guilty to insider trading in late 2010 and cooperated with the government.

Level Global closed its doors shortly after the F.B.I. raid. Earlier this month, Diamondback announced that it was shutting down after a wave of investors withdrew money from the fund.

And there were other SAC connections: Jon Horvath, a member of the conspiracy who pleaded guilty, was an SAC analyst. As part of his guilty plea, Mr. Horvath said that he gave the confidential information about Dell and Nvidia to his boss at SAC, Michael Steinberg, and they traded based on that information. It emerged durin g the trial that just days before Dell announced quarterly earnings in 2008, Mr. Horvath e-mailed Mr. Steinberg with details about the computer maker's financials.

“I have a secondhand read from someone at the company,” Mr. Horvath wrote. “Please keep to yourself as obviously not well known.”

Mr. Steinberg replied: “Yes normally we would never divulge data like this, so please be discreet. Thanks.”

The government has named Mr. Steinberg, a longtime lieutenant of Mr. Cohen, a co-conspirator in the case, but he has not been charged. Barry Berke, a lawyer for Mr. Steinberg, declined to comment.

Banks Seek a Shield in Mortgage Rules

As regulators complete new mortgage rules, banks are about to get a significant advantage: protection against homeowner lawsuits.

The rules are meant to help bolster the housing market. By shielding banks from potential litigation, policy makers contend that the industry will have a powerful incentive to make higher quality home loans.

But some banking and housing specialists worry that borrowers are losing a critical safeguard. Industries rarely get broad protection from consumer lawsuits, and banks would seem unlikely candidates given the range of abuses revealed during the housing bust.

“A lot of bad things are done in the name of expanding access to credit, as we found out,” said Sheila C. Bair, former chairwoman of the Federal Deposit Insurance Corporation and now a senior adviser to the Pew Charitable Trusts.

The legal protection stems from the Dodd-Frank Act, the sweeping regulatory overhaul passed in 2010 to help repair the financial sys tem.

The legislation mandated that loans be affordable, but Congress conceded that banks might fear the legal consequences if the mortgages did not comply. So lawmakers created a type of home loan that would have legal protection, called a “qualified mortgage.” In practice, the protection will make it harder for borrowers to sue their lenders in the case of foreclosure.

The Consumer Financial Protection Bureau, the fledgling agency that is shaping the rules, faces a crucial but difficult task. Banks are pressing for a strong version of the legal shield. They also want qualified mortgages to be available to a broad range of borrowers, not just those with pristine credit.

Consumer advocates also tend to favor a broad definition for qualified mortgages, to maximize the availability of home loans and increase homeownership. But they argue that banks do not deserve a high degree of protection, c iting the problems during the housing crisis.

Big financial institutions have faced an onslaught of litigation since the downturn, although mostly by the government, investors and other companies instead of borrowers. In February, five large mortgage banks reached a $26 billion settlement with government authorities that aimed, in part, to hold banks accountable for foreclosure abuses.

The bureau has some leeway. In writing the proposed rules, the Federal Reserve suggested two approaches, and it is up to the consumer agency to define the safeguard for lenders.

One option, called a “safe harbor,” raises the threshold for litigation. In that case, a borrower may win a lawsuit only by showing that the disputed mortgage lacked the precise features required for a qualified mortgage, like a defined amount for points and fees.

A second option would increase borrowers' ability to challenge a mortgage in court. A loan might appear to comply with the requir ements for a qualified mortgage, but the borrower might be able to introduce other evidence that shows the underwriting fell short of the standards.

For example, a borrower's payments could fall within the guidelines for the qualified mortgage, based on that person's income at the time the loan was made. But the homeowner might have also told the bank that he was about to lose his job or get a divorce, events that could make it much harder to pay back the loan. Under a looser legal shield, the borrower might be able to cite records of such conversations, and contest the mortgage in court.

Moira Vahey, a spokeswoman for the bureau, declined to comment on the specifics of the rule. She added that the bureau should be able to meet the Jan. 21 deadline for completing the rule.

A big question for the bureau is how seriously to take the banks' assertions that they will cut back on lending without a strong legal shield. JPMorgan Chase said last year that weaker pr otection would lead to fewer loans and higher-cost mortgages. “A large percentage of Americans may arbitrarily be shut out of the residential mortgage market,” the bank wrote in a comment letter to regulators.

Some smaller institutions feel the same way. Steven H. Swartout, the general counsel of Canandaigua National Bank and Trust of Canandaigua, N.Y., says the bank will be strongly deterred from making mortgages without a strong legal shield.

“I want a safe harbor, and I want a safe harbor that makes sense,” he said. “This is a quantum change in the risk.”

But consumer advocates say banks are overstating the risks. They indicate that few borrowers have sued lenders over the recent foreclosure mess. And they note that states with tough consumer lending laws have not experienced large numbers of borrower lawsuits.

“A lot of this, quite frankly, is litigation paranoia,” said Michael D. Calhoun, president of the Center for Responsible Lending. “If you ask any of the lawyers in the financial industry, they'll acknowledge there won't be class actions.”

The banks may end up tolerating a weaker provision if the characteristics of a qualified mortgage are sufficiently clear and detailed.

That appeared to be the position banks set out in a July letter from the Clearing House Association, a financial industry group. It said its “priority has been and remains the issuance of clear and objective standards to ensure that the vast majority of borrowers have access to safe and affordable loans at reasonable cost.” If the standards are expansive and clear, the banks say they will feel more certain that t hey have met them.

There is another reason that banks may continue to lend even if they end up with a less secure legal shield. They are making big profits in the mortgage market. Wells Fargo, the top mortgage lender, made $399 billion of home loans in the first nine months of this year, up substantially from $237 billion in the same period of 2011. The bank's mortgage banking revenue surged to $8.6 billion in the first nine months of this year, compared with $5.5 billion last year.

Even a more modest legal shield would still favor the banks, says Alys Cohen, a lawyer at the National Consumer Law Center. In legal terms, it “presumes” from the outset that the banks have met the qualified mortgage standards. Borrowers merely get the chance to “rebut” that presumption. “You are still putting the finger on the scale on the side of the lender,” she said. “The burden for the borrower is still huge.”

Wall Street, Invested in Firearms, Is Unlikely to Push for Reform

As the debate over gun control rages following the horrific tragedy in Newtown, Conn., one unlikely group is expected to play a central role in pushing back against any reform effort: the private equity industry.

It is often overlooked, but some of the biggest gun makers in the nation are owned by private equity funds run by Wall Street titans. The .223 Bushmaster semiautomatic rifle that was used on Friday by Adam Lanza to massacre 20 schoolchildren was manufactured by the Freedom Group, a gun behemoth controlled by Cerberus Capital Management, named after the three-headed dog of Greek myth that guarded the gates of Hades. Its founder, Stephen A. Feinberg, hunts regularly on the weekends with a Remington Model 700.

Besides Cerberus, Colt Defense, a spinoff from the manufacturer of the .44-40 Colt revolver made famous by John Wayne, is jointly owned by Sciens Capital Management, a fund advised by the Blackstone Group and another fund run by Credit Suisse.

On Colt Defense's Web site, it markets weapons for law enforcement and the military, including a 9-millimeter submachine gun that looks like something out of the video game Call of Duty. These are weapons you hope never fall into consumers' hands.

And then there is MidOcean Partners, a private equity firm that once owned the diet company Jenny Craig that now controls Bushnell Outdoor Products. Bushnell makes just about everything for a gun except the gun itself, for both the hunting and “tactical” markets.

Need a laser scope for your semiautomatic handgun? Bushnell makes one called the Tactical Red Dot: First Strike. How about military-grade night-vision goggles? Yep, it has a subsidiary that makes them.

Look ing for a “loader” for your AK-47? It has you covered. Or what about a magazine for bullets? One of its subsidiaries sells the Hot Lips 10-Round Magazine, which is marketed this way: “Put 10 rounds through your 10/22 faster than the blink of an eye, and reload with amazing ease.” (Really, folks. It also makes a 25-round version.)

Perhaps it should not be a surprise, but Wall Street will hardly take a leadership position in the conversation about gun control. The more vocal stances could come from pension funds questioning their investments in gun makers, though they may be loath to take a stand.

Since the killings on Friday, the Freedom Group and other notable gun manufacturers have not commented on the tragedy - not even a basic, “We condemn such violence and pray for the families of Newtown.”

When I called Mr. Feinberg, he declined to comment, as did others. About a year ago, the National Rifle Association issued this statement about Freedom and Cerberus: “The owners and investors involved are strong supporters of the Second Amendment and are avid hunters and shooters.”

Cerberus and other funds with ownership stakes in the gun industry would be in an awkward position if they sought reforms that could hurt their investments. Cerberus invests money in companies like Freedom for other investors, including public pension funds. It has a fiduciary duty to maximize investors' returns.

However, some of its investors may be rethinking their position on investing in companies like Freedom, which was used as an acquisition vehicle to buy up brands including Remington Arms, as well as Bushmaster Firearms and DPMS Firearms, a leading maker of military-style semiautomatics.

The California State Teac hers' Retirement System, which has a stake in Freedom through a $751.4 million investment in Cerberus's funds, said Monday it was reviewing its investment. “At this point our investment branch is examining the Cerberus investment to determine how best to move forward given the tragic events of last Friday in Newtown, Conn.,” the company said in a statement to Reuters.

Private equity firms have a long history of investing in “sin” companies, including guns, alcohol, gambling and tobacco, in part because the companies often are inherently discounted. Kohlberg Kravis Roberts acquired RJR Nabisco in 1988; the R. J. Reynolds Tobacco Company was later spun off.

On Monday, Eliot L. Spitzer, the former governor of New York and the former  New York State attorney general, called on Cerberus's investors to pressure it to try to reform the gun industry.

“While Cerberus, whose array of holdings is vast, is generally immune to public pressure and the opprobrium of trafficking in products that while legal may be marketed in a loathsome way, Cerberus would not be immune to pressure brought by its own investors,” he wrote on Slate.

He added: “Every student at a university should ask the university if it is invested in Cerberus. Every member of a union should ask their pension-fund managers if they are invested. Information is the key first step. From there, action will quickl y follow.”

If Mr. Spitzer is right, the economic impact of such reform may be painful for its investors. About two years ago, when Freedom sought to pursue an I.P.O. (which was later shelved) it identified gun control as one of its biggest “risk factors.”

“The regulation of firearms and ammunition may become more restrictive in the future and any such development might have a material adverse effect on our business, financial condition, results of operations or cash flows,” the company told potential investors. “In addition, regulatory proposals, even if never enacted, may affect firearms or ammunition sales as a result of consumer perceptions.”

Pogue\'s 12 Days of Gadgets: Prank Packs

December 17, 2012, 3:16 pm

Joy to the world - it's Day 8 of Pogue's 12 Days of Gadgets! (All offbeat tech products, all under $100.)

And in this holiday season in particular, we could use a little joy.

Prank Packs (three for $20) will bring it.

They're the boxes for screamingly funny, hilariously awful, but scarily plausible products that don't really exist. New this year, for example:

- The Crib Dribbler. It looks like a giant water bottle, like the kind that clings to the side of hamster cages - but it's for baby cribs. “With the Crib Dribbler feeding system, baby will have the alone time it needs, and its parents can enjoy some quiet time without having to tend to a hungry baby.” “For use with milk, formula, stew and cocoa.” (The testimonials are priceless. “I really like that it's made from recycled plastic syringes!”)

- Pet Sweep. They're basically mop-head slippers for your dog, but of course it's billed as an “Animal-Powered Debris Removal System.”

- Connect-a-Cord. It's 50 one-foot extension cords. “Use your appliances anywhere!” The best part is the bulleted list on the back of the box. “With 50 separate cords, the configurations are endless! 1 foot; 2 feet; 3 feet; 4 feet; 5 feet; 6 feet; 7 feet…” (You get the idea.) It's just plausible enough to become a real product, actually.

The photography, typography and layout of these boxes are perfect. I mean, they look exactly like the cheesiest products you'd buy from TV infomercials.

Anyway, the point is that you put people's real presents inside the empty Prank Pack boxes. Then, when they unwrap their gifts, you get that delicious moment of watching t heir faces as they struggle to be tactful. They think you've just given them the all-time turkey of presents.

Once they figure out that it's just a satirical prank, there's even more laughter - and then gratitude for the much more thoughtful present you've stashed inside.

UBS Unit Is Said to Be Close to Guilty Plea in Rate-Rigging Scandal

10:00 p.m. | Updated

Federal prosecutors are close to securing a guilty plea from a UBS subsidiary at the center of a global investigation into interest rate manipulation, the first big bank to agree to criminal charges in more than a decade.

UBS is in final negotiations with American, British and Swiss authorities to settle accusations that its employees reported false rates, a deal in which the bank's Japanese unit is expected to plead guilty to a criminal charge, according to people briefed on the matter who spoke of private discussions on the condition of anonymity. Along with the rare admission of criminal wrongdoing at the subsidiary, UBS could face about $1 billion in fines and regulatory sanctions, the people said.

The steep penalty, a surprise giv en the bank's cooperation in the case, would represent the largest fine to date in the rate-rigging investigation. In June, the British bank Barclays agreed to pay $450 million to settle accusations that it influenced crucial benchmarks.

The settlement with UBS, which is based in Switzerland, could come as soon as Monday, the people briefed on the matter said. These people cautioned that the bank's board had not yet approved the deal and it could still fall apart.

By pushing for a guilty plea, the Justice Department may be signaling a new aggressive stance.

Authorities have been reluctant to indict big banks, fearful of the potential for job losses and the ripple effect through the broader economy. If a bank pleads guilty to a crime, the case can be tantamount to a death sentence because the institution may l ose its charter to operate.

With UBS, federal prosecutors are trying to strike a balance. By levying a charge against the subsidiary, authorities send a powerful message, but stop far short of putting the company out of business.

Prosecutors decided against indicting HSBC over money laundering, concerned over the repercussions to the financial system. Instead, HSBC, the British bank, agreed on Monday to pay a record $1.9 billion in penalties.

On Thursday, Senator Charles E. Grassley of Iowa, the top Republican on the Senate Judiciary Committee, sent a letter to Eric H. Holder Jr., the attorney general, criticizing the Justice Department for an “inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists,” referring in part to the HSBC case. Mr. Grassley called the fine “hardly even a slap on the wrist,” given HSBC's profit.

But the UBS case offers authorities a long-awaited moment to criminally punish a big bank. While the public is still simmering over the lack of prosecutions stemming from the financial crisis, the actions against UBS could help damp concerns that the world's largest and most interconnected banks are too big to indict.

The Justice Department's criminal division, which arranged the guilty plea with the Japanese subsidiary, could also strike a nonprosecution agreement with the parent company, the people briefed on the matter said. The deal will force UBS to continue cooperating with the wider rate manipulation case.

In a statement, a UBS spokeswoman said the bank continued “to work closely with various regulatory authorities to resolve issues relating to the setting of certain global benchmark interest rates. As we are in active discussions with these authorities, we cannot comment further.” The authorities leading the case - the Justice Department, the Commodity Futures Trading Commission, the Financial Services Authority of Britain and the Swiss Financial Market Supervisory Authority - declined to comment.

As the UBS investigation comes to a close, global authorities are fast-tracking several civil and criminal cases in connection to t he manipulation of important benchmarks, including the London interbank offered rate, or Libor. Regulators and prosecutors have uncovered evidence that points to a systemic problem with the rate-setting process, which underpins trillions of dollars of financial products like mortgages, student loans and credit cards.

Authorities contend that some bank employees reported false rates to squeeze out extra trading profits and deflect concerns about their health during the financial crisis.

The fallout from the Libor case could be significant. The Royal Bank of Scotland has indicated that it could announce penalties before its next earnings release in a couple of months. Deutsche Bank also has set aside money to cover potential fines. In all, the investigation has ensnared more than a dozen big banks.

The push for criminal charges at UBS caught the bank off guard.

After settling a tax evasion case in 2009, the bank was eager to cooperate with authorities and gain leniency in the Libor case. UBS, for example, reached a conditional immunity deal with the antitrust arm of the Justice Department, which was supposed to protect the bank from criminal prosecution under certain conditions. But the deal did not extend to the Justice Department's criminal division, giving authorities some leeway to take action.

With its reputation and profits on the line, the bank moved to dissuade the criminal division from pursuing charges. Bank officials have been meeting with authorities in Washington in a last-ditch effort to influence the outcome, according to the people briefed on the matter.

Eventually, the bank agreed to the broad contours of a settlement that included a guilty plea by the Japanese subsidiary. The bank is still negotiating the final elements of the deal.

Prosecutors are also expected to charge a former UBS trader who featured prominently in the investigation. On Tuesday, Britain's Serious Fraud Office arrested three men in connection with the Libor case, including Thomas Hayes, a 33-year-old former trader at UBS and Citigroup, according to people with knowledge of the matter. The three men, which also included two people who worked at the British brokerage firm R P Martin, were released on bail the same day.

A lawyer for Mr. Hayes could not be located.

Mr. Hayes is expected to be a central figure in the case against UBS. The UBS settlement is likely to include accusations that Mr. Hayes and other employees colluded with traders at other banks to influence the direction of interest rates, as part of a broader scheme to increase their profits. Some UBS traders have been suspended or fired over the matter.

Mr. Hayes built his reputation as an interest rates trader at UBS. He worked at the Tokyo office of UBS from about 2006 to 2009 before departing for Citigroup. Citigroup fired Mr. Hayes the next year, for approaching a trading desk about influencing the yen-denominated Libor rates, and the bank reported his actions to regulators.

The role of Japanese op erations came to the forefront last December when the country's regulator sanctioned both UBS and Citigroup. Local regulators discovered that traders at the banks had tried to manipulate the Tokyo interbank offered rate, or Tibor, a main benchmark for borrowing in Japan.

The efforts to rig the rate were “unjust and malicious, and could undermine the fairness of the markets,” the Securities and Exchange Surveillance Commission of Japan said in a statement when recommending the nonfinancial penalties against UBS.

UBS has a big presence in Japan. The bank has more than 1,100 employees in the country, spread across its major business lines.

The guilty plea could have collateral consequences for the unit. For one, the guilty plea delivers a painful blow to its reputation, securities experts say. Depending on the details of the case, the group could also be subjected to an independent monitor and face some limitations on its business.

Charlie Savage and Hiroko Tabuchi contributed reporting.

A version of this article appeared in print on 12/14/2012, on page B1 of the NewYork edition with the headline: UBS Unit Is Said to Be Close to Guilty Plea in Rate-Rigging Scandal.

Wall Street Stars Raise Their Lighters at Sandy Benefit Concert

Bruce Springsteen may decry the hardships of the working class at the expense of “robber barons” and flesh-eating “greedy thieves,” but, hey, even hedge fund managers like to rock out every now and then.

The Boss, the Rolling Stones and Kanye West weren't the only stars packed into Madison Square Garden on Wednesday night for 12-12-12: The Concert for Sandy Relief, a benefit that raised millions of dollars to help out victims of the hurricane. Many of Wall Street's top players were jamming along, too.

DealBook spotted David Einhorn of Greenlight Capital, Daniel S. Och of Och-Ziff Capital and Barry Sternlicht of Starwood Capital among the throngs lined up in front of the stage. Just behind them was Gary D. Cohn, the president of Goldman Sachs.

Just behind the front row stood Steven A. Cohen, the head of SAC Capital. (Does he know that Mr. Springsteen recently dedicated a performance of “Death to My Hometow n” to Preet Bharara, the federal prosecutor behind a crackdown on insider trading? That investigation has ensnared several former employees of Mr. Cohen's hedge fund.)

A contingent of JPMorgan Chase executives were on hand. Jamie Dimon walked around, dressed down in his customary off-duty outfit of leather jacket and blue jeans. Gordon A. Smi th, a co-chief of the firm's consumer & community banking arm, and Frank Bisignano, the co-chief operating officer, were taking in the performances from an upstairs suite, as was Douglas Braunstein, the outgoing chief financial officer.

And James E. Staley stood several rows from the front of the stage, looking relaxed in an untucked shirt alongside his wife.

Elsewhere in the crowd, DealBook was told, William A. Ackman of Pershing Square Capital Management was making his way through the packed floor of the Garden. Whitney Tilson of T2 was seen bopping along to the music as well. And Robert Kraft, the investor who owns the New England Patriots, was spotted sitting off to the side of the floor.

Among nonfinancial types, Millard S. Drexler of J. Crew was seen on the crowded floor.

Behind the attendance of many financiers - beyon d the desire to see Paul McCartney singing with a mostly reconstituted Nirvana - was the group that put on the 12-12-12 show, the Robin Hood Foundation. Mr. Cohen, Mr. Einhorn, Mr. Och, Mr. Staley and Mr. Sternlicht are all on the board of the nonprofit.

The reason for JPMorgan's big presence at the concert, besides being the event's presenting sponsor, had ties to Sandy as well. The bank brought about 100 employees who had been affected by the hurricane, either by being displaced or for exceptional efforts to help repair communities in its aftermath.

Some of the firm's employees took buses out to the Rockaways in Queens to assist in cleaning up the wreckage, while others helped organize food trucks like Korilla BBQ to trek to Staten Island. Still others drove around Lower Manhattan, installing generators at Chase branches to keep them open and let residents charge their phones.

At a dinner reception before the concert, Mr. Dimon thanked his employees for their efforts. While he was in Asia on business during the storm, he said he quickly heard of JPMorgan workers' volunteer initiatives.

“I am so damn proud of what you did,” he said.

Afterward, the employees - chosen by lottery - nibbled on pigs in blankets and sushi rolls and met with Tyson Chandler of the New York Knicks. But one employee apparently was more interested in an autograph from his boss, coming up to ask Mr. Dimon to sign his ticket.

The chief executive complied.